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Government urged to support SME decarbonisation efforts in response to energy crisis

Published September 2, 2022

Government urged to support SME decarbonisation efforts in response to energy crisis

The Federation of Small Businesses (FSB) has called on the government to provide additional financial support to SMEs’ efforts to decarbonise as part of a package of proposals to deal with the energy crisis.

Rather than abandoning efforts to reduce carbon emissions, the FSB suggests the government should introduce ‘Help to Green’ vouchers. Modelled on the Help to Grow Digital scheme, this would be a voucher scheme to support businesses to decarbonise, with £5,000 vouchers to be spent on environmental goods and services.

The call comes after the energy regulator, Ofgem, announced the household energy price cap is to increase to £3,549 in October.

The FSB estimates bills rose for small businesses by 349% for electricity and by 424% for gas between February 2021 and August 2022. For a London business which consumes 30,000 kWh annually, this would mean its electricity bill increased from £4,700 to just over £21,200. Its gas bill would have increased from £1,350 to just under £7,050 over the same period.

The Federation is also calling for the government to extend the price cap to the smallest businesses. “Small businesses are left out in the cold when it comes to energy bills, with the vast majority excluded from the household energy price cap and other protections designed for domestic household consumers,” commented FSB chair Martin McTague.  “Unlike large corporates, small firms cannot hedge costs and negotiate deals with their large energy suppliers. Many of our members say the eye-watering energy bills could be the final nail in the coffin as they struggle to get through winter.”

The FSB is also calling for small businesses to receive direct help with bills. This could either be administered through the business rates system or directly applied to energy bills.

Other proposals include a temporary reduction of taxes on energy. For example, the higher-threshold rate of VAT could be reduced from 20% to 5%. The lower threshold and domestic rate of VAT could be reduced from 5% to 0%.